Babst Calland: Nexus Requirement Clarified Under New Jersey’s Spill Act

Babst Calland

In a decision issued September 26, 2012, the New Jersey Supreme Court clarified the standard for demonstrating causation in a claim for damages under the Spill Compensation and Control Act (Spill Act). The Court held that a plaintiff claiming damages, costs or other similar relief under the Spill Act must show a "reasonable nexus or connection" between the hazardous discharge at issue and the contamination at the damaged site, by a preponderance of the evidence. N.J. Dep't. of Envtl. Prot. v. Ofra Dimant, No. 067993, - A.2d -, 2012 N.J. LEXIS 956 (N.J. 2012). The Court rejected the more stringent common law "proximate cause" standard, as well as a more lenient causation standard (some connection) applicable in CERCLA claims, and chose a middle ground based on the purposes and legislative history of the Spill Act. In the end, New Jersey Department of Environmental Protection (DEP) found itself out of court, having failed to establish the requisite level of proof against the defendant.

In Dimant, a 1988 DEP investigation revealed perchloroethylene (PCE) groundwater contamination in residential wells in Bound Brook, New Jersey. DEP identified several drycleaning businesses in the vicinity, including defendant Sue's Clothes Hanger (Sue's). Tests at Sue's indicated that an indoor pit containing PCE was not leaking and could not be a source of PCE discharge. At trial, DEP proved only that, on one occasion, a pipe exiting Sue's was observed to be slowly dripping onto an asphalt surface, and a sample of the dripping liquid contained PCE. However, DEP did not offer any evidence that the drip continued in the long-term, that the asphalt underneath the drip was cracked or eroded, that the dripping liquid flowed off of the asphalt or that the PCE in the dripping liquid did not volatilize. The trial court noted that any drip from Sue's ended by early 1989, and that groundwater and soil contamination at the site preceded Sue's dry cleaning operation. Both the trial and appellate courts found that DEP's proof regarding Sue's dripping pipe was insufficient to hold Sue's jointly and severally liable for damages to groundwater at the residential wells under the Spill Act.

Dry Cleaners Sign

The primary dispute between the parties on appeal involved the required level of proof under the Spill Act for the causal "nexus" between a discharge and environmental damage. The Court outlined a two-step analysis for causation. First, the plaintiff must demonstrate a nexus between the discharger (the party "in any way responsible" for the discharge) and the discharge. Second, the plaintiff also must show a nexus between the discharge and the contaminated site. Under this framework, DEP argued that the level of proof required for the causal nexus should be based on the federal standard set under CERCLA, which requires only the demonstration of "some connection" between a defendant's actions and environmental contamination. The Court disagreed, based on the significant differences between the Spill Act and CERCLA with regard to liability, and CERCLA's unique legislative history. Similarly, the Court rejected the common law proximate-cause standard for causation, because that higher standard "would thwart the salutary public purpose underlying [the] comprehensive and groundbreaking [Spill Act]."

Rather, the Court held that a "reasonable nexus or connection must be demonstrated by a preponderance of the evidence." That is, in a suit for damages, a defendant must "be shown to have committed a discharge that was connected to the specifically charged environmental damage of natural resources . . . in some real, not hypothetical, way." It is insufficient for a plaintiff to prove merely that a defendant made a substance that was found at the contaminated site, and "ask the trier of fact to supply the link." The "reasonable nexus" standard, however, is also flexible enough to support the range of relief available under the Spill Act; the Court noted that injunctive relief, unlike damages and authorized costs for cleanup, may be obtained with proof of a discharge alone.

The Court's analysis in Dimant also raised several issues tangential to the primary holding. First, while considering CERCLA as a possible model for the causation standard, the Court highlighted the different liability schemes of CERCLA and the Spill Act. While CERCLA provides for apportionment of harm among responsible parties when a reasonable basis exists for doing so, the Spill Act explicitly imposes joint and several liability on any person or entity who is "in any way responsible" for a discharge. The Court suggests that the Spill Act provides "some mechanism for divisibility" by allowing defendants to bring contribution actions against other dischargers. However, this conclusion ignores the fact that a defendant under the Spill Act, unlike a CERCLA defendant with a sustainable divisibility argument, is liable for the entire cost of remediation up front, and will carry the burden of proving its contribution case against other dischargers. Second, the Court made several statements regarding the limits of DEP's authority to now place the burden of the costs of an investigatory obligation on Sue's, "considerably more than a decade" after observing the dripping pipe. The Court affirmed that DEP, after failing to act on its initial observation of discharge, could not require Sue's to pay for investigation costs incurred many years later by DEP because such an obligation would be "fundamentally unfair."

The New Jersey Supreme Court's decision in Dimant offers an example of proof that is inadequate to demonstrate causation under the Spill Act, as well as an articulated standard for causation. It is unclear where on the spectrum between common law proximate cause and Superfund's "some connection" the newly articulated Spill Act nexus requirement falls. The application of the new standard to unique factual scenarios at other sites will require further interpretation of the Court's statements.

For further information about the Dimant decision and the standard for causation under the Spill Act, please contact Lindsay P. Howard at 412-394-5444 or lhoward@babstcalland.com or Timothy C. Wolfson at 412-394-6536 or twolfson@babstcalland.com.

Copyright 2012• Babst, Calland, Clements and Zomnir, P.C. • Two Gateway Center, Pittsburgh, PA 15222 • 412-394-5400 • Administrative Watch is distributed by Babst, Calland, Clements and Zomnir, P.C., for the general information of its clients, friends and readers. It is not designed to be, nor should it be considered or used as, the sole source of analyzing and resolving legal problems. If you have, or think you may have, a legal problem or issue relating to any of the matters discussed in the Administrative Watch, consult legal counsel.

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